Thursday, July 16, 2009

Economics 17/07/2009: Pathologies of the crisis

If Ireland were a patient, its political democracy would be on its death bed. This is the only logical conclusion from today's An Bord Snip Nua report.

This country is facing a more severe crisis than that of fiscal insolvency or economic depression. This Government, and its predecessors have chosen not to do their duty by the country - they chosen not to govern. Now they have also de facto lost their legitimacy.

The outsourcing of policy decisions to an unelected and unrepresentative external bodies - chiefly the Social Partnership - in the past had a logical culmination in the outsourcing of the crisis management policies to An Bord Snip Nua and Taxation Commission. The fact that An Bord Snip did a decent job in identifying expenditure cuts is a moot point.

The state has paid extravagant salaries to FAS, Forfas, NCC, NESC, Department of Finance, Central Bank, and other policy quangoes to conduct
  • analysis of economic and policy conditions in the country for years - they all missed the crisis that was obviously unfolding in front of their eyes, more than that - they directly contributed to the crisis by creating or intellectually underwriting the policies that led us here;
  • preparation of policy responses - they all failed to deliver a single implemented policy document of any real economic worth;
  • crisis management - they all chose to abstain from engaging in what they were paid to do.
The state has paid billions in wages and perks to an army of civil servants who produce illiterate, embarrassingly childish policies and waste resources, obstructing change and reforms.

An Bord Snip Nua report says this much, yet still leaves them all in their jobs, until they choose to retire and saddles us, taxpayers with the charge of paying their grotesquely disproportionate (by any measure of their competence and/or international comparisons) wages.

CB and Forfas reports this week on Irish economy are the case in point. People who signed these reports earn more than their US, UK, German - you name the country short of some totalitarian oil-pumping hell-hole - counterparts. These reports have zero value, for they contain not an ounce of new information. Their authors will go on working till retirement in permanent jobs, while their bosses will go one collecting wages that are so sinfully out of proportion to their talents, they make them the lottery winners compared to the senior bankers.

But let us get back to the crisis of our state legitimacy.

This Government took the job voluntarily. Their first act in power was to accept huge pay increases for themselves and their senior cronies in the public sector. They have no capacity or legitimacy to rule. Yet our Taoiseach, and his Ministers, collect more in wages and perks than the vast majority of other leaders in mature democracies. Some of our Ministers are simply completely inadequate in positions they fill. We pay them hundreds of thousands in annual wages and millions in pensions benefits believing that if you pay peanuts for a job you get monkeys. What if you pay millions to the monkeys? Will that make them suitable candidates for the job?

Angry yet?

Our trade unionists and anti-poverty NGOs leaders believe that the Government is measured by how it treats the poor not by how much it overpays itself. Fergus Finlay of Barnardo's believes so. This is the morality of such a depraved estate that feudal lords would have cringed. It makes no difference that Barnardo's is a worthy organization pursuing a worthy cause - failing to understand that this state has more than one constituency to answer to (not just the poor), and that the legitimacy of the state objectives (including that of combating poverty) is based on morality of state actions in their totality, Finlay either betrays an amazingly low level of intellect or an extremely high levels of Machiavelian cynicism. Either way - his failure to accept at a basic, DNA-level the moral premises of liberty, legality and democracy make him an unfit public figure, no matter how well-intentioned his direct objective might be.

Our Liberal Left - where are you, Fintain O'Toole, Ivana Bacik and others, to oppose this - believes it is ok for the Government to raid the lower, middle and upper classes, to squander and corruptly allocate billions in public money... as long as their own constituencies are protected. "Give me my dosh", they say, "and we'll close our eyes on what you will do elsewhere," say the Trade Unionists and Finlay's of this world - those who have signed on the dotted Partnership line dividing the spoils of the boom and now have no guts to point the finger at the lack of our government's moral legitimacy.

Under the Partnership agreements and the corporatist policies they enshrined, the entire public finance system, since the departure of Charlie McCreevy, has been run like a crude, unimaginative pyramid scheme - partially out of sheer incompetence and partially out of sheer venality of its managers. One exception is that a sleek salesman defrauding old grannies was replaced by a brutish taxman with the full apparatus of coercion this state possesses.

Bernie Maddoff was a saint compared to this Government. It took billions in arbitrary taxes and wasted tens of billions in arbitrary payoffs to its own cheerleaders. The chart on the second page of Chapter 2 of the An Bord Snip Nua report shows this explicitly. All of this - in the hope that we will raise more taxes come next year. They paid lavish dividends to their Social Partners cronies, their pub and childhood chums, and a vast army of clientilist NGOs and quangoes all of whom apparently have no problem with the state officials at the senior level earning excessive salaries as long as their own cogs and constituencies were greased.

The country is bankrupt: morally first, financially second, economically third. Full stop! Read An Bord's Report and think of John Hurley's of this country - earning more than the US Federal Reserve Chairman earns and more than his ECB boss is paid. Golden Circle is not the by-now bankrupt Irish bankers or developers. The real Golden Circle is the army of top officials, majority of the Social Partners and politicos all of whom are grossly overpaid and all of whom are callous and venal enough not be embarrassed by this fact.


Anonymous said...


Fantastic summary of the state of the nation. (But please get a proof-reader to check your text before posting!)

Saw you on Prime Time this week and you made the other guests seem like clueless children. Is there any chance that you would start a political party and lead the 'velvet revolution' that this country so badly needs?

Best regards....

Anonymous said...

And I'd like to add two further points:

Vote No to Lisbon

Buy gold.

Anonymous said...

The only difference is that Madoff accepted his sentence and acknowledged his culpability.. he didn't blame "the system" for his attempts to feather his own nest.

Nobody has nor will be brought to face justice for the catastrophe they have created on this little island.

We have become gutless and deluded.

Anonymous said...

I fully agree with you analysis. Now, what are the next options at a personal / private business level. I would welcome your comment on how I as a business owner should plan for the future in Ireland or is it time to plan emigration? JG

MK1 said...

Hi Constantin,

I saw you on Vincent Browne and Prime Time in the last few days.

I fully agree with you that the government and golden circle and the partnership has served vested interests in the main. I agree, Fergus Finlay should be as vexe on the cuts on the high earners, as should anyone. However, the usual mantra is tiotted out that the total gain made on pursuing those would be minimal. However it should be done and you are rioght to be vexed.

However, there are larger fish to fry. An Board Snip Nua (ABSN = absinthe?) looked at a few brief ways in a few short weeks of cutting public sector expenditure. They did not look too much at capital spending, as it was officially outside their scope.

We are awaiting reports on taxes, high paid earners, salary, whwthere a new benchmarking should be done etc. Its the waiting which we are now paying for, and as you point out, this is lack of governance.

One problem that will hit many as the cutbacks start, is how come the banks are being saved, and NAMA is another parachute for many. Kroes is in town outlining that all of Europe needs to apply the same level of state assistance to banks. In other words, we have all been breaking the rules.

But the saving of the banks cant be let alone surely whil eth ecust come in in the PS and while one and all adjust to doing jobs which are productive (and not based on funds provided by credit).

Will a party offer something different that reflects this and will the people vote for them?

The next geneal election, should, in theory see a sea change in the political landscape. I would hazard a guess now though that the lemmings will vote 60% the same as the last time.

No wonder there is apathy ......


Anonymous said...

Totally agree. Your article is spot on. To have any legitimacy at all the first thing our government should do is cut their own pay by 30%, something they should have done a year ago anyway.

Patene said...

Well done Constantin. You are right, we have now got a political system populated by well paid monkeys. Motivated by this incompetent rabble, the Irish people -- drunk on debt -- have deluded themselves that they had somehow become a wealthy elite.

Unless the Irish electorate develops a level of sophistication that regards political vision, thought leadership and integrity as key characteristics of our political system, things will never change.

Libertarian Atheist Rationalist said...

Just like Mr Gurdgiev, I am outraged at the way the country is run. But I shouldnt be, because that is a natural result of our crude democratic system.

Ireland needs a massive increase in democracy. The people should directly elect the cabinet, as in the US, France Poland etc. We also need national seats in the Dail instead of so many geographic constituencies. New Zealand has already made this change. Then we'll have TDs who represent national issues and not just doing favours for their constituency.

Citizens should ultimately have the power to initiate referendums, call a general election, and even seccede from the republic and set up virtual nations within the republic.

I believe the answer to nearly all problems of government is more direct democracy.

Anonymous said...

Excellent analysis.

Let me post an anecdote which illustrates the hypocracy of Fergus Finlay in particular and the 'Left' in general.

I remember listening to a radio programme around July 2002 on which Finlay a was a guest.The topic was asylum seekers and immigration.

Some callers to the programme asked that asylum seekers and non EU immigrants undergo an aids test before admittance is granted to Ireland.
Finlay went off on a rant about how racist a policy that would be and how shameful were those callers.
It was subsequently pointed out by some callers that Irish people immigrating into the USA were mandated to undergo an aids test and a thorough medical examination.Failure to comply or failure in either test and no visa was granted.

This was widely known ,yet despite this neither Finlay (when he was in government) nor anyone else objected to the US authorities.
The US policy ,is of course , a very sensible and reasonable one to follow where the primary objective was to protect the health and safety of its own citizens first.